The Challenges of Selecting High Yield Latin American Dividend Stocks, Part 3

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 |  Includes: APSA, ASR, BCH, BFR, BLX, CPL, IRS, OMAB, PAC, PVD, SCCO, SID, TMX, YPF
by: Bennington Investment Ideas

The two previous articles in this series focused on screening ADRs for high yield Latin American dividend stocks. I found the following ADRs to offer substantial current dividend yields:

High Yield Latin American ADRs
Ticker
Name Dividend Yield Country Industry
PVD Administradora de Fondos de Pensiones-Provida, S.A. 6.9% Chile Financial
YPF YPF Sociedad Anonima 6.4% Argentina Oil & Gas
APSA Alto Palermo S.A. 6.3% Argentina Real Estate
BFR BBVA Banco Frances 6.0% Argentina Banking
CPL CPFL Energia S.A. 5.7% Brazil Utility
SCCO Southern Peru Copper Corporation 4.6% Peru Mining
TMX Telefonos de Mexico - Series L 4.3% Mexico Telecom
IRS IRSA Inversiones y Representaciones 3.8% Argentina Real Estate
BLX Banco Latinoamericano de Comercio Exterior, S.A. 3.8% Panama Banking
OMAB Grupo Aeroportuario del Centro Norte 3.7% Mexico Transport
SID National Steel Corporation 3.6% Brazil Steel
BCH Banco De Chile 3.4% Chile Banking
PAC Grupo Aeroportuario del Pacifico 3.3% Mexico Transport
ASR Grupo Aeroportuario del Sureste 3.2% Mexico Transport
Click to enlarge
Source: Yahoo!Finance and other data is provided by Zacks.com services. Dividend yields were taken from April 1, 2011 and may have changed due to fluctuating stock prices. Dividend yields are based upon trailing 12 month dividend payments and could be subject to future changes.

The first article reviewed SCCO, BLX, CPL and BFR. The second article reviewed OMAB, TMX, PVD, and BCH. This article will focus on YPF, IRS, PAC, and ASR. YPF is probably the most interesting opportunity given its high yield and position in the Oil & Gas industry.

YPF Sociedad Anonima (NYSE:YPF) currently has a market capitalization of around $17.9 billion and is engaged in oil and gas refining and marketing. It operates approximately 70 oil and gas fields in Argentina. YPF's business is divided into six segments.YPF Recent Historical Dividends
Date Dividends Trailing 12 Months Implied Yield
11/10/2010 1.465 2.884 41.24 7.0%
4/21/2010 1.419 3.030 44.52 6.8%
11/9/2009 1.611 3.307 37.00 8.9%
5/11/2009 1.696 3.616 29.57 12.2%
11/13/2008 1.920 7.389 46.74 15.8%
5/7/2008 2.055 5.469 45.10 12.1%
2/26/2008 3.414 3.414 39.79 8.6%
3/16/2007 1.933 1.933 41.41 4.7%
5/10/2006 1.973 3.459 49.07 7.0%
11/18/2005 1.486 4.254 63.71 6.7%
4/28/2005 2.768 4.288 51.75 8.3%
11/5/2004 1.520 4.660 40.25 11.6%
4/29/2004 3.140 4.082 38.96 10.5%
7/11/2003 0.942 2.648 26.30 10.1%
4/22/2003 1.706 2.839 18.25 15.6%
11/20/2002 1.133 1.133 10.85 10.4%
Click to enlarge

Source: Yahoo!Finance

While dividends have been declining in recent years, rising oil prices should improve YPF's outlook. It is expected to declare another dividend shortly.

IRSA Inversiones y Representaciones (NYSE:IRS) has a market capitalization that is just under $800 million. It is focused on real estate development in Argentina. IRS owns and operates shopping centers, residential apartment complexes and luxury hotels. IRS owns and operates 11 shopping centers. Many of its assets are located in the greater metro Buenos Aires area.

IRS Recent Historical Dividends
Date Dividends Trailing 12 Months Closing Price Implied Yield
11/16/2010 0.524 0.524 15.72 3.3%
11/12/2009 0.144 0.144 7.85 1.8%
Click to enlarge

Source: Yahoo!Finance

The short and irregular dividend history makes IRS a less interesting company. It should be noted that prior to 2000, IRS also made dividend payments. These yields were highly variable ranging from 1% to 5%. IRS would offer one way to gain real estate exposure to Argentina.

Grupo Aeroportuario del Pacifico (NYSE:PAC) has a market capitalization of
$1.7 billion and operates 12 airports in central Mexico. Recent key news includes about a 5% year on year decline in traffic for the month of March.

PAC Recent Historical Dividends
Date Dividends Trailing 12 Months Closing Price Implied Yield
11/24/2010 0.350 1.399 36.92 3.8%
6/10/2010 1.049 1.480 33.82 4.4%
10/28/2009 0.431 1.500 25.32 5.9%
5/20/2009 1.069 1.447 21.21 6.8%
10/28/2008 0.378 1.848 16.46 11.2%
5/7/2008 1.470 2.007 40.76 4.9%
10/26/2007 0.537 1.871 55.08 3.4%
5/14/2007 1.334 2.491 49.63 5.0%
Click to enlarge

Source: Yahoo!Finance

PAC has not recovered to its pre financial crisis price levels and is showing declining dividend payments which could cause additional concern. Investing in this stock would require additional fundamental research.

Grupo Aeroportuario del Sureste (NYSE:ASR) is a $1.7 billion market cap company that operates 9 airports in southeastern Mexico including vacation hot spots, Cancun and Cozumel. The company was founded in 1998 and currently has about 900 employees. It is about to declare another dividend and has had regular dividend payments with ex-dividend dates in late May or early June. Dividends are paid annually.

ASR Recent Historical Dividends
Date Annual Dividend Closing Price Implied Yield
5/14/2010 2.024 51.37 3.9%
5/8/2009 4.708 31.47 15.0%
5/22/2008 1.909 50.48 3.8%
5/30/2007 0.695 50.79 1.4%
5/25/2006 0.616 35.60 1.7%
5/25/2005 0.562 29.00 1.9%
6/7/2004 0.491 18.46 2.7%
5/22/2003 0.487 12.94 3.8%
5/24/2002 1.556 16.15 9.6%
Click to enlarge
Source: Yahoo!Finance

It is clear that ASR has paid highly irregular dividends. Recent strong performance might not continue; however, the stock price has recovered to its peak levels in 2007 and 2008. Current dividend yield is also not reflective of the yields from 2004-2007 which were substantially lower.

Conclusion
Within these four ADRs, YPF probably offers the best prospects given its high dividend yield with a track record of high yields and exposure to oil and gas. Both airport operating companies offer pretty variable performance. OMAB, reviewed in Part 2, is probably a better option than either PAC or ASR. Between PAC and ASR, I would probably choose PAC due to more consistent dividends. IRS extremely short history and relatively smaller size disqualify it as a great dividend play.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Disclaimer: This article is for informational and educational purposes only and shall not be construed to constitute investment advice. Nothing contained herein shall constitute a solicitation, recommendation or endorsement to buy or sell any security.